My New Year’s Resolution: Make Money Off Other People’s Resolutions
As New Year’s rolls around each year, 45% of Americans typically make resolutions to better their life, according to StatisticBrain.com. Of that group of people, only 8% are successful in their resolve.
#-ad_banner-#I gave up resolutions a few years ago for just that reason. I am a type-A personality and regularly make goals anyway, so I didn’t see the need for the perennial tradition.
These days, I am focused on the resolutions made by others. Simply understanding how others are expected to act in the New Year can be a basis for a winning investment.
Fitness And Finances
We’ve all been there. The holidays are over and you’ve accomplished two things, increasing your pants size and decreasing the size of your savings account. That’s why fitness tops the list with the first and fifth most common resolutions (improving financial health is the third most common resolution).
In January, Americans will flood the fitness clubs and will resolve to save more of their money. This could mean strong sales for exercise facilities, active wear apparel and financial services firms with a share in the retail market.
Life Time Fitness, Inc. (NYSE: LTM) operates 109 spa and fitness centers in the United States and Canada.
The financial crisis hit the company hard as high unemployment led people to cut back on discretionary spending. Life Time is currently mounting a turnaround — opening six new centers over the past year.
That’s starting to impact the income statement. Revenue increased 6.6% in the third quarter (from a year ago), and that growth is expected to help earnings rise 11% next year.
Life Time announced in August that it would seek approval for a REIT conversion. The net result: The operations-side of the company would represent sales and profit trends at the fitness centers, while the REIT will generate income for investors, based on the real estate. This move should lower tax costs and could provide stronger cash return for shareholders. The split still requires regulatory approval and is expected to close in August 2015.
Hedge fund Marcato Capital Management took an 8% stake in Life Time Fitness to September, but may have trouble forcing operational changes. The company subsequently adopted a shareholder rights plan, which will deter any one investor from taking more than a 9.8% stake in the company.
The rights plan expires in August 2015, which comes after the proposed REIT conversion. While the poison pill limits the hedge fund’s options, it will still have a voice and could decide to work with management to increase shareholder value.
Dicks Sporting Goods, Inc. (NYSE: DKS) operates 676 sporting goods stores in 46 states and offers a range of products from apparel to equipment. The Golf and Hunting accessories categories have been weak, restraining results for the broader company. Despite that, DKS has still been able to meet or beat expectations.
The apparel segment could be a big beneficiary of New Year’s resolutions as people look for the clothes that will motivate them to exercise. The company announced in early December that it would be the exclusive provider of a line of active wear by Carrie Underwood, which may help to bring in a new customer group.
After improving their health, consumers often also look to improve their finances in the New Year.
That should lead more funds to flow to The Charles Schwab Corp. (NYSE: SCHW). Schwab offers brokerage and banking services with a relatively strong position in the retail investor market.
Assets at the advisory business have increased at a 17% compound annual rate over the past three years, and 50% of all assets under management receive some form of ongoing advisory service. At the end of 2013, the company had 9.1 million active client accounts and is on track to increase core assets by $100 billion for the third straight year. With 37% of its revenue from net interest income, Schwab will also benefit from rising rates next year.
The company recently announced the rollout of Schwab Intelligent Portfolios, a technology driven portfolio process that is planned for the first quarter 2015. The platform should appeal to younger investors. Schwab is also planning to launch a version geared toward registered investment advisors, which could shake up the way investments are managed.
Risks To Consider: New Year’s resolutions alone may not be enough to lift stock prices, so be sure to select stocks with other catalysts, such as the ones noted above.
Action To Take –> Nearly half (45%) of the country will make a New Year’s resolution this year with fitness and finances topping the list for most. Position your portfolio in companies that will benefit from a health-conscious consumer that is looking to save and invest money.
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